Tech giant issues what one analyst calls 'a thinly veiled threat'

SAN FRANCISCO (MarketWatch) -- Cisco Systems Inc. on Monday raised its bid for Tandberg to 19 billion Norwegian kroner ($3.4 billion), with the U.S. networking giant seeking to overcome resistance from shareholders of the Norwegian videoconferencing firm.

But the San Jose, Calif.-based company also strongly suggested that, if rebuffed, it will withdraw its bid to buy Tandberg and find other ways to expand into its market. An analyst called Cisco's statement "a thinly veiled threat."

Cisco, with some $35 billion of cash, took its bid for Tandberg (TAA) to 170 kroner a share in cash, above its previous bid of 153.5 kroner.

Previously, a group of shareholders representing 24% of Tandberg had objected to the offer.

Cisco said it won't go any higher than $3.4 billion with its Tandberg offer, saying in a statement the company "believes that this revised offer remains consistent with the principles of prudence and financial fairness."

"If Cisco does not achieve the desired level of acceptances, the company will withdraw the offer and evaluate alternative ways to expand our activities in the video-communications market," the company added.

"That's a relatively thinly veiled threat," Wedbush analyst Matt Robison said in an interview, noting that Cisco was conveying that its latest offer is final. "I don't believe they would add such a language if they didn't feel like this was the end of diplomacy. It's clear that they're going to endeavor to become a more meaningful competitor to Tandberg if the bid is not accepted."

This time around, however, the offer has the support of the largest holders, Folketrygdfondet and Oppenheimer Funds. That means Cisco now has received acceptances representing in excess of 40%. Cisco's original bid was supported by holders of just 9% of Tandberg.

The company's board of directors also endorsed the new proposal. In a statement, Tandberg Chairman Jan Chr. Opsahl said: "We believe this is an outstanding offer for our shareholders. The Tandberg board of directors unanimously recommends this offer to shareholders."

James Crenshaw, an analyst at Standard & Poor's Equity Research, said a rival Tandberg bid is now unlikely.

Expanding in videoconferencing is important for Cisco since it's such a big bandwidth driver, which can help the Dow component sell more routers and switchers, according to Ole Jorgen Rod, an analyst at First Securities in Norway.

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